Indian Stock Market Analysts Talk

Brokerage houses are bullish on Bharat Forge, Bank of Baroda, Grasim Industries, Union Bank, Himatsingka Seide, Satyam Computer.

Prabhudas Lilladher :: Bharat Forge: Meeting expectation

Prabhudas Lilladher rates Bharat Forge as a “market performer”. The report states that the company, India’s largest in forgings business, came out with Q1FY07 results in line with expectations. EBITDA margin at 24.2 per cent was flat yoy and qoq. The company reported 15.7 per cent rise in net sale to Rs 420 crore, while adjusted PAT was up 14.5 per cent to Rs 46 crore. The target plus incentive scheme reversal of Rs 4.5 crore is the adjustment to the profit. Exports growth recorded at Rs 170 crore was just 10.3 per cent and the better performance was attributable to the 20.6 per cent jump in domestic sales to Rs 280 crore. Domestic sales growth has lagged the combined passenger and commercial vehicle production growth at 21.8 per cent this quarter. Despite the significant 24.7 per cent rise in manufacturing expenses, which had to do with higher costs of power, the company reported a mere 16 bps fall in the EBITDA margin to 24.2 per cent, as raw material costs were kept well under control at 44.3 per cent of net sales (against 45.1 per cent reported a year ago).

UTI Securities :: Bank of Baroda: Growth prospect

UTI Securities recommends a “buy” on Bank of Baroda. The report states that the bank’s continuous thrust on lending was evident during the June quarter, where advances grew by 37 per cent, while the interest on advances registered a growth of 42 per cent indicating better yields. Net interest income grew by 16 per cent, while PAT grew by just five per cent on account of higher provisioning. Net interest margins also improved to 3.39 per cent. The report, however, expects rising interest rates and stagnating investment yields to result in squeeze in margins going forward. Credit growth also expected to be lower than the levels witnessed during the previous year. Despite these adversities, the report finds valuation of the stock attractive at current valuation of 1.06x FY08. Overall, the business growth was at 28 per cent. Total business of the bank increased from Rs 1,25,710 crore to Rs 1,61,160 crore. Deposits increased by 23 per cent to Rs 99,780 crore from Rs 81,060 crore. The share of CASA deposits in total domestic deposits improved to 41.2 per cent.

Morgan Stanley :: Grasim Industries: Cementing gains

Morgan Stanley has an “overweight” rating on Grasim Industries. Consolidated revenues were up 29 per cent, while net profits grew by 47 per cent. After five quarters of yoy decline in profits (adjusted for extraordinary items), Grasim reported strong growth in numbers on the back of pricing strength in the cement division. Strong revenue growth and PBIT margin gains (up 720 bps to 25.5 per cent) were driven by an increase in realizations in both the cement (up 36 per cent) as well as VSF (up eight per cent yoy) divisions. However, Cement was the star performer as expected. Revenue for the cement division grew to Rs 2,320 crore on the back of a pricing increase, while PBIT jumped 148 per cent (to Rs 680 crore). The cement realizations drove a 1260 bps increase in PBIT margins to 29.2 per cent for Q1 FY07, the best in the recent history for the company.

Angel Broking :: Union Bank:: Healthy growth

Angel Broking recommends a “buy” on Union Bank of India. The report states that the bank exhibited healthy growth in operating profits posting 20.8 per cent growth in Q1 FY07 to Rs. 426.5 crore from Rs 353.1 crore in the corresponding previous period. However, its net profit declined by 30.6 per cent to Rs 166.8 crore from Rs 240.4 crore due to higher provisioning for investments in government securities. Net interest income (NII) from core operations at Rs 634.5 crore, a yoy growth of 18.7 per cent, was almost in line with expectation. A strong growth in advances of 34.1 per cent to Rs 55,802 crore, resulted in an increase in the credit/deposit ratio of 73 per cent, form 66 per cent last year. The bank also registered a significant improvement in its total business of 26.3 per cent to Rs 1, 32,319 crore for Q1 FY07. Advances grew by 34.1 per cent to Rs 55,802 crore, largely supported by a growth in retail advances of 38.1 per cent from Rs 8,623 crore to Rs 11,906 crore.

Emkay Research :: Himatsingka Seide: Good show

Emkay Research recommends an “accumulate” on Himatsingka Seide. The company performed better than expectations, with sales increasing by 10.5 per cent to Rs 37.8 crore in Q1 FY07 against Rs 34.2 crore last year. Revenues increased mainly on account of 14.4 per cent increase in fabric sales. The report believes that revenue growth to be slightly higher from Q1 FY07 growth, as order book and domestic retail sales continue to grow at a decent pace. EBIDTA margins were lower on yoy basis by 540 bps to 33.3 per cent, on account of higher raw material and power and fuel costs. The later were higher by 40 per cent from last year. On a qoq basis, EBIDTA margins were higher as the company increased realizations to pass on higher raw material cost. PBT was up by 22 per cent to Rs 15.1 crore, as other income increased by 92 per cent to Rs 6.2 crore. PAT during Q1 FY07 was higher by 28 per cent over last year to Rs 14.4 crore.

ILFS Investsmart :: Satyam Computer:: Growth agenda

ILFS Investsmart recommends a “buy” on Satyam Computer. The company reported revenues of Rs 1440 crore and net profit of Rs 350 crore in Q1 FY07, a sequential increase of 9.8 per cent and 24.4 per cent, respectively. Though Satyam (like Infosys) also increased its full year FY07E topline and bottomline guidance by three per cent and eight per cent, respectively, the report was disappointing as the increased guidance was to take into account better than guided Q1 FY07 and rupee depreciation, than improved visibility. The report remains bullish on the company on account of the increased traction in its enterprise solutions business and its ability to mine clients. Because of better than expected Q1 FY07 and rupee depreciation, the report is increasing its FY07E and FY08E EPS estimates by eight per cent and seven per cent, respectively.

Sharekhan

Sharekhan has put buy rating on Selan Exploration

DSP Merrill Lynch

DSP Merrill Lynch has kept buy rating on IVRCL

CLSA